Nearly all politically viable solutions for the health system’s ills over the last four decades have been market-based solutions aimed at harnessing the competitive pressures of the market to produce better outcomes at lower cost while preserving individual choice. In Health Care’s Market Bureaucracy, Professor Allison Hoffman reviews the empirical evidence of the effectiveness of such policies in three primary areas – the market for health insurance, the market for medical care from the patient/demand-side, and the market for medical care from the provider/supply-side. She then systematically breaks down both the costs of insisting on a market-based approach to health care and the illusory nature of individual choice within such approaches.
There are, of course, many health law and policy scholars who believe a market-based health system is not a normatively desirable approach to health care. But what makes this article so powerful is that it takes on market-based theorists on their own terms, analyzing the evidence of whether and to what extent the market has delivered desired results. The article is valuable, in part, simply because it takes a holistic view of market-based health policy. But more specifically, it makes three important contributions to the literature. First, it brings attention to the enormous costs associated with a commitment to maintaining health care markets, both in terms of financial costs and policy bandwidth. Second, it provides a clear-eyed examination of what individual choice can and cannot accomplish in a market-based health system. And finally, it acknowledges that relying on market-based solutions allows all of us to avoid the hard choices we know must be made in allocating scarce health care resources.
The article’s title phrase, “market bureaucracy,” is a reference to the enormous financial costs and government infrastructure that have resulted from our commitment to health care markets. The ACA individual insurance markets provide a timely example of this phenomenon. Instead of directly providing health insurance in one form or another to the target uninsured population, the ACA has required a massive investment of time, infrastructure, and money, while delivering coverage to a relatively small percentage of the population. The federal government spent nearly $5 billion on state grants to establish the state exchanges, and spends $1 – $2 billion a year to operate healthcare.gov, the federally-funded exchange. States spend additional, significant amounts each year, all to maintain health insurance markets that sell largely standardized plans. And here Professor Hoffman makes a powerful point: the market-based policy of the ACA likely created more bureaucracy than a more direct approach to expanding access would have and arguably makes consumers worse off at the same time.
Creating this significant bureaucracy would not necessarily be a bad thing if, in fact, the system were welfare maximizing. But as Professor Hoffman’s review of consumer choice in the market for health insurance suggests, the available choice in our market-based system provides little apparent benefit. The ACA’s state-based markets are regulated to provide relatively standardized offerings. All plans are supposed to offer a nearly identical package of benefits at standardized actuarial values. Plans, then, should compete on limited and productive bases: provider networks, premiums, cost-sharing structure, and maybe insurer reputation. Yet numerous studies of consumer choice in ACA markets are reviewed in this article, nearly all of which strongly suggest that “[c]onsumers left to their own devices seem to make large errors when choosing health insurance…and they seem to be unaware of their failure.” (P. 32.) Professor Hoffman suggests that we might be better off if we simply handed the best available health plan to individuals or, as she notes more controversially, if we denied coverage for medical care with low or no value.
The article not only pushes against assumptions about the ways markets function and the benefits they deliver, but also reminds us that being able to claim that the market will maximize welfare allows us to shirk our responsibility to make the hard decisions: who gets health care and how much? But Professor Hoffman is realistic about this last issue. She acknowledges that it’s possible that a market-based approach might be the best we can do – that the social and political costs of having these harder conversations may simply be too high – although she does offer some suggestions about paths forward for collective decisionmaking around these issues.
Professor Hoffman does not hide that part of the article’s purpose is to encourage health law and policy scholars to spend less time obsessing over reforms that improve in some marginal way the function of health care markets. I consider myself part of the target audience for this call to action and I found it to be a truly helpful and challenging reminder that there are other paths forward that are worth the same careful thought as market-based solutions. She encourages us to “put down the technocratic tools” and “let go of the false hope that market-based solutions will solve U.S. health care woes.” (P. 87.)